TSX runs higher on rate cut expectations
Investing.com-- ING sees a greater chance that the Bank of Japan will hike interest rates in May, especially after Tokyo consumer price index inflation data read higher-than-expected for March and pointed to broadening price pressures.
ING said Friday’s Tokyo CPI data showed price pressures were becoming more broadly based, with core inflation also accelerating past consensus.
“This ripple effect is already being noticed by the Bank of Japan. With upside inflation risks growing, the odds of a BoJ’s rate reaction increase,” ING analysts wrote in a note.
The BOJ is also expected to have more clarity on ongoing wage negotiations by May, with policymakers recently signaling that they expect another year of bumper hikes.
Strong wage growth is expected to further underpin inflation, giving the BOJ more impetus to act.
The central bank had left interest rates unchanged last week, but had signaled that it will remain open to raising interest rates further if inflation continues to rise and as Japan’s economy grows.
BOJ Governor Kazuo Ueda reiterated this stance earlier in the week.
The central bank had raised rates by 25 basis points in January, as it saw clearer evidence of a “virtuous cycle” of higher wages, improving growth and rising inflation.
The BOJ had kicked off a tightening policy last year, ending nearly a decade of ultra-loose Japanese monetary policy.